SaaS Pricing Models: 7 Essential Tips to Increase Your MRR

According to statistics, users around the world are predicted to spend $623.3 billion on software as a service (SaaS) by 2020.

The SaaS market is heating up with workloads expected to increase from 206 million in 2018 to 380 million by 2021. In the face of this growth, companies need to learn not just how to win new business but also how to grow their existing revenue base.

The monthly revenue rate (MRR) is a critical metric that gauges all your recurring revenue in a normalized month. To sustain your growth, you need to figure out how to leverage pricing for more income. Here are some tips to help grow your MRR through your SaaS pricing models.

1. Move Away from Freemium

Freemium is one of the most popular pricing models for Saas Products used as a way to earn trust with new users you can eventually convert into paying ones. The problem with freemium is that although you do initially get more users through the door, a significant number won’t have the best value perception.

Primarily, freemium users tend to view your services through the $0 lens. Therefore, with every tactic you will employ to convert them, they will keep thinking of reasons why they shouldn’t pay since they are getting a level of service for free.

Another reason why freemium might appeal to you is that it enables your business to receive feedback on your products. The main problem with relying on this b2b pricing saas model is that you have to offer support to the free users. Consequently, a chunk of the revenue coming in from paid users ends up subsidizing support for free users.

The solution to avoid the issues with a freemium model and grow your MRR is to adopt a time-limited free plan.

Offering a freemium plan for a set period (seven, 14, 30, or 60 days, for example) helps new users experience the value you can give them within a reasonable window. From there, you can convert them to paying customers without spending too much on support.

As you bring in more free users on a time-limited plan, you can market your services and get valuable feedback while growing your MRR.

2. Upsell, Upsell, Upsell

Growing your MRR is easier and cheaper by upselling existing customers than bringing in new ones. Since customers you already service trust your brand, you can get them to spend more each month via a well-timed upsell.

Adopting per-user pricing where customers pay according to the number of users (which increases by bands and not in single digits) helps grow your MRR. As your customers benefit from your offering and use your product more, you also increase your revenue.

Another way to earn more from existing users is to offer valuable features that your base packaging does not provide at an extra fee. The pre-existing trust you have with current users can help drive greater adoption of these add-ons, which then scalably grows your MRR. This is also one of the best pricing models for saas.

3. Steer Clear of Unlimited Plans

If you run a SaaS business, it can be tempting to offer unlimited pricing plans. Essentially, unlimited plans cap the amount a user can pay even though they keep getting ‘unlimited’ value.

Although conventional business wisdom dictates that your users should feel they are receiving more value than they are spending, you have to remain sustainable. Unlimited plans tend to skew the balance between value and revenue unfavorably, which can stall your MRR.

Typically, the users who tend to take up unlimited plans are those that value your product. For this customer segment, you can earn more by progressively lining up value with proportional pricing instead of capping it. The more they benefit from your product, the more they end up spending per month.

4. Add Annual Prepayment to Your SaaS Pricing Models

Customer churn a challenge to every Saas business, and if you are to defend and grow your MRR, you have to develop ways to beat off churn. One powerful saas pricing model strategy in your pricing arsenal to combat churn is yearly prepayment plans.

When a customer pays for your product 12 months in advance, it becomes hard for them to later move to a competitor. Annual prepayment makes the switching cost for customers high, which increases your customer retention rate. Ultimately, your monthly recurring revenue can grow as you retain more customers on this saas pricing model.

5. Consider Going Upmarket

Are you offering enterprise-level value with your products but still charging small and medium business pricing? Growing your MRR might as simple as moving upmarket in terms of the prices you charge.

Aligning your price to the level of value your product offers helps you capture more revenue, which can lift your MRR. Of course, to pull this off you can’t depend on pricing alone.

Your offering needs to be compelling enough for enterprise users to justify the shift in the price for them. The good news is that such customers tend to have better budgets; thus, your chances of sustaining growing MRR using this strategy can be promising.

6. Use Time-Limited Offers

The customers who no longer use your product can be a source of growth for your MRR monthly recurring revenue. To bring them back into the fold, you should explore using time-limited special offers to rekindle their interest in your product.

Once the offer period ends, you will find that a portion of the returning users tend to stick around. Thus, you improve your reactivation MRR rate.

7. Uniquely Priced Customized Bundles

Aside from the standard product bundles you offer, creating an avenue for your users to customize their own feature set can unlock a new revenue stream for you.

For potential users who only need a partial set of services, your product offers, paying for the full product can feel like a waste. Empower them to select what they only need while pricing it competitively to not only win them over but retain them. That will contribute to increasing your MRR.

Unlock Revenue with Your SaaS Pricing Strategy

The SaaS market is poised for growth, and for prudent firms, building sustainable income calls for growing your MRR. Pricing is a vital tool in unlocking more revenue, and you should analyze ways in which your offering can leverage SaaS pricing models to earn more from existing users while retaining them on top of attracting new users.

Billsby is a recurring billing software with the infrastructure to support your SaaS business. Talk to us today for a demo on how Billsby can help you handle your recurring revenue for smoother operations.